Depreciation Calculator

Depreciation spreads the cost of a long-lived asset over its useful life — the period during which it generates revenue. Saudi accounting standards (and international IFRS) recognise three primary methods: straight-line, declining-balance, and sum-of-years-digits.

Straight-line: equal expense each year

The simplest and most common method. Equal annual expense over the asset's useful life. Best for assets that wear evenly over time (buildings, furniture).

Annual depreciation = (Cost − Salvage) ÷ Useful life

Double-declining-balance: front-loaded

An accelerated method. Year-1 expense is high; later years are smaller. We automatically switch to straight-line in any year where SL on the remaining base yields a larger expense — this guarantees the asset fully depreciates to its salvage value.

Year expense = Book value × (2 ÷ Useful life), with floor at salvage value

Sum-of-years-digits: accelerated but smooth

Another accelerated method, but with a smoother decline than DDB. The 'sum of years' = 1 + 2 + ... + life = life × (life+1)/2.

Year n expense = (Cost − Salvage) × (Life − n + 1) ÷ Sum-of-years

Worked example

A machine costs 10,000 SAR, has a salvage value of 2,000 SAR, and a useful life of 5 years. Depreciable base = 8,000 SAR.

1. Straight-line: 1,600 SAR every year for 5 years
2. Declining-balance year 1: 10,000 × 0.4 = 4,000 SAR
3. Declining-balance year 2: 6,000 × 0.4 = 2,400 SAR
4. Sum-of-years year 1: 8,000 × 5/15 ≈ 2,667 SAR
5. Sum-of-years year 2: 8,000 × 4/15 ≈ 2,133 SAR

Which method to choose?

• Use straight-line for buildings, furniture, and assets that wear evenly.
• Use declining-balance for IT equipment and vehicles that lose value rapidly early on.
• Use sum-of-years for assets with somewhat accelerated wear, when DDB is too aggressive.
• Consult your accountant and the relevant tax rules; the method affects taxable income.